A brief focus on Zimbabwe’s economy and its outlook

A plethora of policy pronouncements, substantial de-industrialisation and some remarkable and controversial economic events over the years in Zimbabwe have given rise to the question; ‘Does Zimbabwe have an economy at all?’. I have dedicated this article to really outline what exactly constitutes an economy in a country.

In a recent Facebook post by the Vice president of Zimbabwe Emmerson Mnangagwa (08 March 2017) he lamented over the way the Reserve Bank Governor; John Mangundya and the Minister of Finance; Patrick Chinamasa were handling economic issues. He stated,

“These guys are too theoretical in the way they operate. Their usual excuses are monotonous. If you go to Chinamasa, he will tell you I do not have money and if you ask Mangudya he will tell you the economy is about to take off.”

An economy is definitely not an aeroplane which gets ready to take off and lands at a prescribed destination. Since the two officials mentioned by the Vice President are in charge of key economic portfolios, a brief exposition of what constitutes an economy would help ordinary people and scholars to appreciate the concept of an economy.

Simply defined, an economy is the large set of inter-related production, consumption and money supply activities that aid in determining how scarce resources are allocated. The massive and rapid closures of industrial firms in Zimbabwe have resulted in low or no production at all. The once vivacious industrial hubs in Zimbabwe are now as quiet and lifeless as the cemetery.

A drive through Zimbabwe’s industrial sites now is akin to passing through a ghost town. The key components of a modern economy are; production, consumption and adequate money supply. In Zimbabwe there is now little or no production at all. Given the little or no productive capacity, Zimbabwe is now a consumption economy. In a consumption economy, successful corporations are the ones who can best manage their global networks of suppliers to obtain the lowest costs which is not possible for Zimbabwean economy because of foreign currency and cash shortages.

Consumer spending in Zimbabwe mainly creates jobs in other countries. Many of the consumer goods we buy are imported from neighbouring South Africa and other countries. It has been largely publicized before that Zimbabwe is an agro-based economy and at its peak agriculture contributed 30 percent of GDP.

In the early 2000s at the start of the land reform program it was widely broadcasted that “Land is the economy and the economy is the land.” A very simple understanding of economics points out that land is not an economy but simply a factor of production. In other words, we need all the factors of production which include land, labour, capital and entrepreneurship for a healthy and sound economy. Zimbabweans might have taken land but without a right combination of all factors of production the agricultural economy envisaged remains a pipeline dream.
The economy of a particular country is governed by its culture, laws, history, and geography, among other factors, and it evolves due to necessity. The Scottish philosopher Adam Smith (1776) believed that economies evolved from pre-historic bartering systems to money and eventually credit-based economies.

Zimbabwe is a cash based economy, and now with a currency and cash shortages it means the economy is crippled. It is thus important to know how the aggregate economy behaves. The glaring question now given all the fundamentals hangs: “Is Zimbabwe still an economy since it lacks the other two key component of an economy which are production and adequate money supply?”.